The Portuguese economy has performed remarkably well since joining the
EU in 1986. Output per worker grew at an annual rate of 2.25%. The relative
price of investment has declined. Real investment has increased compared to
output, in part fuelled by an increase in capital inflows. At the same time,
resource allocation seems to have improved as well: firm-level data shows a
significant decline in the dispersion of labor productivity and size across
firms. This paper argues that improvements in outside investor rights that have
taken place sine Portugal joined the EU is a prime candidate to explain this
set of facts.